The firm said current tough recycling market conditions and a fall in commodity and recyclate prices had resulted in “lower recycling earnings before interest, tax, depreciation and amortisation (EBITDA) in 2014/15 than expected”.
Furthermore, the statement adds that the current market conditions “could impact profitability next year should these conditions continue”.
The pre-close financial statement comes amid a tough climate in the recycling market, with oil prices and PRN volatility particularly affecting the sector.
Despite this, however, Pennon Group said that Viridor’s underlying EBITDA is still expected to exceed that posted during the previous 12 months, in part due to the continued growth of its energy-from-waste business.
According to the statement, Viridor is now “at a point of inflexion” in its move from a predominantly landfill business to a recycling and energy recovery business, as it previously reported in its half year financial statement in November 2014 (see letsrecycle.com story).
EfW
With the company’s Exeter, Ardley, Trident Park and Runcorn I EfW plants coming online in the last year, and with several more in the pipeline, Pennon Group said: “Together with the continuing strong performance from the Lakeside ERF joint venture, income from these plants is expected to substantially boost underlying EBITDA in H2 2014/15 and beyond. Construction has commenced at Dunbar and the plants at Peterborough and Glasgow are both more than 60% complete.
The statement also said: “Viridor has made excellent progress in establishing its ERF business this year, which will contribute meaningfully to growth in profits and cashflow.”
It added that the energy recovery facilities contribute to Viridor’s bottom line “reflecting the realisation of a strategy which is expected to contribute circa £100m to Viridor’s EBITDA in 2016/17”.
Dividend
And, as a result of Viridor’s progress in its energy-from-waste business, the Pennon Group said it was “pleased to announce” its intention to continue the current dividend policy of year-on-year 4% growth above PRI inflation up to 2019/20.
Overall, Pennon Group – which also includes South West Water – said its financial performance this year remains in line with previous statements, with a “strong liquidity and funding position” and the business being “well positioned for the future”.
Pennon Group intends to announce its preliminary results for 2014/15 in May.
Related Links:
–Pennon Group ‘Pre-close Trading Statement and Group Dividend Policy 2015 – 2020’
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